Correlation Between Sinopec Oilfield and X FAB

Can any of the company-specific risk be diversified away by investing in both Sinopec Oilfield and X FAB at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sinopec Oilfield and X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinopec Oilfield Service and X FAB Silicon Foundries, you can compare the effects of market volatilities on Sinopec Oilfield and X FAB and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sinopec Oilfield with a short position of X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopec Oilfield and X FAB.

Diversification Opportunities for Sinopec Oilfield and X FAB

-0.28

Correlation Coefficient

Sinopec Oilfield  X FAB

Very good diversification

The 3 months correlation between Sinopec and XFB is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Oilfield Service and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon and Sinopec Oilfield is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sinopec Oilfield Service are associated (or correlated) with X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Sinopec Oilfield i.e., Sinopec Oilfield and X FAB go up and down completely randomly.

Pair Corralation between Sinopec Oilfield and X FAB

Assuming the 90 days trading horizon Sinopec Oilfield Service is expected to generate 2.41 times more return on investment than X FAB. However, Sinopec Oilfield is 2.41 times more volatile than X FAB Silicon Foundries. It trades about 0.12 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.07 per unit of risk. If you would invest  4.70  in Sinopec Oilfield Service on September 4, 2024 and sell it today you would earn a total of  2.40  from holding Sinopec Oilfield Service or generate 51.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sinopec Oilfield Service  vs.  X FAB Silicon Foundries

Sinopec Oilfield Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopec Oilfield Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sinopec Oilfield reported solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sinopec Oilfield and X FAB

The main advantage of trading using opposite Sinopec Oilfield and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Oilfield position performs unexpectedly, X FAB can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in X FAB will offset losses from the drop in X FAB's long position.

The idea behind Sinopec Oilfield Service and X FAB Silicon Foundries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.